Jerome Powell Is a Happy Federal Reserve Chief

There’s nothing like a good consumer-price reading to make a Federal Reserve Chairman smile. The price index for May came in flat on Wednesday morning, which made for a confident Chairman Jerome Powell in the afternoon as he explained the latest Federal Open Market Committee decision after its two-day meeting this week.

The May CPI came as a relief after three months in row in which inflation had rebounded after last year’s declines. That rebound clearly made an impression on the FOMC, whose members stood pat on their fed-funds interest rate target of 5.25% to 5.5%. They also signaled that they expect to stick with the current level of interest rates for longer.

In their famous “dot plot” estimates of future economic conditions, the Fed governors and regional bank presidents lifted their projections for “core” inflation this year to 2.8%, up from 2.6% in March and 2.4% in December. They also downshifted their expected cut in rates to a single 0.25 point reduction through the rest of this year, down from three in March. Some in the financial markets not too many months ago were pricing in multiple quarter-point rate cuts in 2024.